Private option hits speed bump

Health centers raise objection to Medicaid waiver.

Arkansas's community health centers are strong proponents of the private option plan for Medicaid expansion, but they have lodged some of the loudest complaints against one of the proposed federal waivers to enable the policy, saying they won't be reimbursed well enough to stay open.

With both Republican lawmakers and health-center leaders digging in their heels, the controversy has the potential to pose trouble for the implementation of the private option.

The state's 12 federally-qualified health centers (FQHCs), which operate 83 health center sites serving more than 160,000 patients, are reimbursed for Medicaid patients at a higher rate than other providers under what's known as the prospective payment system, or PPS. The enhanced reimbursement is necessary because the centers are required to offer services to all who come in the door, many of whom don't have any insurance at all.

The private option plan, which requires the waiver of certain federal rules to proceed, would expand coverage to more than 200,000 low-income Arkansans who do not currently qualify for Medicaid. The plan would use Medicaid funds to fully subsidize their purchase of private health insurance, paid for in full by the federal government for the next three years, with the state eventually picking up 10 percent of the tab. One of the proposed waivers drafted by the state Department of Human Services requests permission from the feds to let the private carriers negotiate their own reimbursement rates with the community health centers for this new expansion pool. These rates would likely be significantly lower than the enhanced PPS rate. The centers would continue to get the PPS rate for existing Medicaid eligibles and for the medically frail, who will go to the traditional Medicaid program rather than the private option.

"We want to let the private market work on its own, and let the private carriers pay the private-carrier rates," DHS spokeswoman Amy Webb said. "We want to be consistent across the board. We don't want to be making exceptions. ... The bottom line is we don't want to be telling private insurance carriers who they have to contract with and how much they have to pay those providers. That's for the carriers to work out."

The reimbursement waiver is "really critical," said Rep. John Burris (R-Harrison), one of the key Republicans behind the expansion plan. "It goes straight to the heart of the private option."

Located in underserved areas, federally qualified health centers offer comprehensive primary and preventative care, and by law must offer their full range of services to anyone who walks in the door, regardless of insurance status or ability to pay. The FQHCs charge a sliding-scale fee based on income. They offer coordinated and holistic care using a "patient-centered medical home" model, said Sip Mouden, chief executive officer of the Community Health Centers of Arkansas, and they provide services that are in many cases more extensive than the plans on the marketplace will be required to provide. "We take exception to trying to be put inside of a box to look like everybody else when we're not," she said. "Our model of care, our provision of services, is different."

Currently 40 percent of the state's FQHC patients are uninsured and another 28 percent are on Medicaid. Because of their unique mandate to serve everyone regardless of ability to pay, the centers receive federal grants to help cover the cost of treating the uninsured (as well as funds from state general revenue). Congress created the special enhanced reimbursement rate for the FQHCs because Medicaid rates weren't covering the cost of treating Medicaid patients, and the centers can't shift the money allotted to covering the uninsured to subsidize Medicaid patients. According to Mouden, even with the enhanced rate, the average reimbursement for FQHCs is just 80 cents for every dollar in cost.

The centers project that private carriers may average a reimbursement of 59 cents on the dollar. Mouden says that by law, if the centers get private reimbursement rates for the private option pool, it's up to the Medicaid program to make up the difference between that rate and the enhanced PPS rate. Also, she said that if a carrier doesn't include the centers in its network, private option recipients should still be covered to go to the centers. Regulations released from the federal Centers for Medicare and Medicaid (CMS) this month appear to indicate that access to the centers is indeed a mandated Medicaid service and that the centers must be reimbursed at the PPS rate. Prior CMS guidance was clear that private option-style plans would need to cover the cost of mandated services not covered by the private plans (commonly called "wraparound services"). On the surface, though DHS and CMS officials have been working together closely, it would appear that DHS's request runs afoul of CMS rules.

"We have spoken with CMS," Webb said. "Thus far, they have not taken an official position on this issue. I think they are hoping it can be resolved at the local level."

If the state was required to make up the difference between the private reimbursement rate and the PPS rate, it would likely increase the overall cost of the private option. Webb said that DHS has not yet attempted to project the difference but "it's something we're trying to determine."

Of course, the feds pay 100 percent of expansion's costs for the first three years, which covers the entirety of the private option demonstration waiver — but Arkansas still has reason to be concerned. In order to get federal approval, the state has to ensure that the private option is budget neutral versus a traditional Medicaid expansion, and if the policy continues beyond three years, the state would eventually have to pick up some of the tab. That said, Mouden argues that FQHCs are cost-effective in the long run, pointing out that they currently provide services to 6 percent of Medicaid beneficiaries, but take up only 0.5 percent of Medicaid expenditures.

Mouden believes that if the PPS rate was waived for the expansion population, centers would be hit with unsustainable losses and many would be forced to close. Burris countered that in fact the centers will see a net gain because many of the currently uninsured will be gaining coverage. Part of the funding challenge that led to the PPS rate in the first place is serving large numbers of uninsured people. Even a private rate lower than PPS, Burris argued, is better than nothing in the form of uncompensated care.

"We've got to reassess the whole system because uncompensated care is going to go away," Burris said. "[The health centers] are critical, but their whole model needs to change. Their whole model is built around treating an uninsured population. Well obviously that's changing."

It's not that simple, according to Mouden. "We will never achieve 100 percent coverage," she said. "I wish we could. But realistically, I know that we won't. We're always going to be the safety net."

Inevitably, some people will remain uncovered even after the health care law goes into effect. Some will simply choose not to enroll in health insurance, even if it's subsidized, even if that means paying a fine. Some populations, such as the homeless or the mentally ill, may prove difficult or impossible to enroll.

While a significant portion of the centers' currently uninsured will move to coverage under the private option, the FQHCs predict that this won't put much of a dent in the number of uninsured that they serve because they'll be gaining new patients too. They point to the experience of Massachusetts; when it moved to near-universal coverage, as Arkansas aims to do, many other providers stopped doing charity work, leaving the centers as the provider of last resort. Even as Massachusetts has dropped all the way down to 2 percent uninsured, the percentage of FQHC patients in the state that are uninsured remains at 21 percent. Mouden argues that when the health care law goes into effect in Arkansas, centers are likely to see a similar number of uninsured patients and an increase in Medicaid patients; since they'll be losing money on each Medicaid patient, they'll be facing a massive hit if the reimbursement on many of those new patients is even lower.

Just what the impact of the private option expansion will be on the centers — whether Burris is right, or Mouden — is not a simple equation. There are a number of moving parts, and it's largely dependent on factors we currently don't know, such as how many uninsured will remain in the state and what rates the private carriers will pay. Burris, along with Sen. David Sanders (R-Little Rock)and Sen. Jonathan Dismang (R-Beebe), have requested more specific numbers from Mouden; Burris said that one of his main frustrations was the lack of hard data to back what strike him as counterintuitive assertions. Mouden has worked with the state's FQHCs to develop projections, which they will present to the legislature's Joint Public Health committee this week. She has been meeting with lawmakers from both parties on the issue, including the governor.

Burris expressed concern about a lawsuit, and said "if they sue, it's over" — he believes that the legislature would balk at proceeding with the private option if this policy question was tied up in litigation.

"At no time have we ever discussed a lawsuit," Mouden said, saying that she was focused on trying to educate lawmakers and stakeholders about the role of FQHCs. "I'm going to focus on how we can make this right within the process and system that's been established."

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Speaking before a joint session of the legislature, which is reconvening this week for a special session, Hutchinson argued that these 60,000 Arkansans "will not lose access to coverage" and would get "the same level of financial support that they have now." The truth is a little more complicated. /more/

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